SBI jacks up short-term retail FD rates by 25-75 bps

MUMBAI: Signalling better returns for depositors going forward, the nation’s largest lender State Bank of India has increased the pricing on short-term retail fixed deposits (FDs) by 25-75 basis points, taking the peak offering to 6.25 per cent, a move other banks also likely to follow amidst rising credit demand and falling liquidity.

This is the first interest rate hike on deposits since December last by the bank that controls over a fifth of the system wide funds and liabilities, when it had jacked up the prices by up to 65 bps.

Unlike savings or current deposits, a fixed deposit gets better pricing for the account holder as it is for a fixed tenure unlike the current and savings accounts deposits. While the former don’t fetch any earnings for the depositor the latter offer a very nominal rate which is as low as 2.75 percent per annum from SBI and as high as 5-7 percent by some private sector lenders. These deposits have no tenor and the fund can be withdrawn with no notice to the bank. One basis point is one-hundredth of a percentage point.

For retail domestic term deposits (below Rs 2 crore) maturing between 46 and 179 days, SBI is now offering 75 bps more at 5.5 percent from 4.75 percent earlier and 6 percent to senior citizens as against 5.25 percent earlier.

For deposits on the 180-210 days maturity, the pricing is 6 percent now from 5.75 percent and 6.25 percent for seniors.

The bank is now offering 6.25 percent on deposits maturing in the 211-365 days tenor compared to 6 percent earlier. This tenor fetches senior citizens 6.75 percent.

The bank has also hiked interest rates on domestic bulk term deposits (Rs 2 crore and above) by 10 bps to 50 bps across different maturities.

Bulk deposits in the 46-179 days bucket, now fetches 6.25 percent, up from 5.75 percent. The rate goes up by 20 bps to 7 percent for those in the one-year to less than two year bulk deposits.

In FY24, SBI’s gross advances grew 15.24 percent and deposits 11.13 percent. Its domestic term deposits increased 16.38 percent as the bank was chasing low cost funds. And chairman Dinesh Khara is expecting 14-16 percent credit growth in the current fiscal, led by retail and corporate loans.

Khara had also said the bank was sitting on excess liquidity of around Rs 3.5 trillion but has live loan sanctions worth Rs trillion which means the bank will have mop up capital to arrange for funds for disbursal.

Between May 2022 and February 2023, the Reserve Bank hiked the repo rate by 250 bps hike to 6.5 percent.